Investment Strategies 02 (Jun 10 - Jun 13)

[winston]

As Greek Debt Default Nears, Investors Need to Take Cover
By David Zeiler

With the Greek debt default crisis nearly upon us, investors need to map out their strategy now.

According to Money Morning Chief Investment Strategist Keith Fitz-Gerald, investors should take the following steps to protect themselves:

• Sell weaker positions and transition that money into companies you really want to own -particularly if they are the "glocals" we talk about so frequently, and especially if they have high dividend yields.

• Begin tightening up your protective stops so that you can both capture gains and protect your capital as the market rolls over.

• Buy commodities including gold, silver, oil and pharmaceuticals.

• Invest in the specialized reverse exchange-traded funds (ETFs).

• And, most importantly, KEEP BUYING - but change up your tactics to include dollar cost averaging.

There's no sense in making all-or-nothing decisions when that type of thinking doesn't fit market conditions.

"Remember, you miss 100% of the shots you don't take, so getting to the sidelines is not a profitable plan," Fitz-Gerald said.

"Staying in the game always has been, and always will be, the way to profit."

http://moneymorning.com/2011/09/14/as-g ... ake-cover/

[winston]

What Should Investors Do NOW ? By Barry Ritholtz

Whenever we get a day like today — down more than 500 points on the Dow at one point — my phone begins ringing with inquiries from various media.

They always ask the same question: What should investors be doing NOW?

That is the wrong question. The proper one is: What should investors have done in the past, to prepare for an event like TODAY?

Rather than repeat my usual spiel, I will simply point you towards some recent writings on that subject:

Anticipating (versus reacting to) the next black swan April 2 2011

Why the wild stock ride? August 6 2011

Smacked by big market swings, investors should alter their outlook August 19 2011

The investor’s dilemma: Earnings, valuation and what to do now September 10 2011

The bottom line remains that investing is a proactive — not reactive — endeavor. If you respond to every twitch, every news story, each turn of the wheel, you will become whipsawed.

That is no way to invest. And its no way to live life, stressing out over things that are out of your control.

What you can do is anticipate events that are cyclical in nature. These major shudders repeat every few years, so we should not be surprised by them.

Construct a plan that allows you to ride out these events without panic or forced errors. You need a plan that anticipates these regular occurrences.

I strongly believe that many people are capable of doing this for themselves (No, you don’t have to pay anyone a fat fee for that). All it requires is a little intelligence, some home work, and a bit of planning

http://www.ritholtz.com/blog/2011/09/wh ... rs-do-now/

[winston]

The Safety Strategies to Embrace Now

Investors should follow these eight guidelines, while keeping an eye on their long-term investment goals.

Investors should:


1. Stay in the Game: With such a dour near-term prognosis, it might be tempting to bail out of stocks indiscriminately. Do so at your own risk.

As Fitz-Gerald likes to say, "you miss 100% of the shots you don't take. Staying in the game if at all possible always has been, and always will be, the pathway to profits."


2. Take What the Market Gives You: Bull markets aren't the only places you can make profits. The key is being nimble enough to recognize that the tide has changed.


3. Consider Alternatives: An example of other profit opportunities right now involves commodities - most notably gold and oil - which are worth buying on pullbacks (like we're getting now).

China and India, for instance, have both dramatically increased their resources purchases in recent years.


4. Think Globally: The conventional wisdom used to be that you'd put 5% of your portfolio into "foreign" stocks. It's a new ballgame now, and some advisors say the right number is actually 30% to 40%.


5. Sell Strategically: Capture profits and protect your capital using "trailing stops" that are gradually ratcheted up over time. This will help you raise cash ( which can be used to buy into the rebound when it eventually happens) without the emotional turmoil that causes most investors to make rash decisions that doom them to years of sub par profits.


6. Hedge Your Bets: Use specialized inverse funds to hedge downside risk that will accompany the rollover to the downside and rack up significant gains at the same time.


7. Deal in Dividends: Dividend-paying stocks pack a punch - no two ways about it.


8. Keep Your Pencil Sharpened: Bear markets create bargains - often lots of bargains. Keep a shopping list of the companies you hope to buy, then wade in.

If market conditions remain uncertain, change up your tactics. For example, consider averaging into your position over days, weeks, or even months, to make sure you don't overpay. That can help you take advantage of lower prices while also keeping you in the game.

Think of it as a form of offensive defense. "Discipline never goes out of style," Fitz-Gerald says.

"Your best friend right now is a carefully thought out, pre-planned investment program that helps you eliminate the kinds of knee- jerk reactions that are going to skin most investors for the third time in a decade - once on the way down, once because they buy in at the wrong time or with too much money, and once because they get left on the sidelines (again) when things eventually sort themselves out."

http://moneymorning.com/2011/09/26/inve ... ket-crash/

[winston]

Seven Investing Rules From Winston Churchill’s Life by Carl Delfeld

Lesson # 1 – Aim High

When you put your hard-earned money at risk, you should aim high for big returns.

Churchill always aimed high no matter what obstacles lay in his way. This always meant taking risks that led to his greatest victories, as well as his most painful defeats.

In his youth, seeking fame and glory, he threw himself into five conflicts around the world. His political career was a wild roller coaster ride, but he always kept his eye on the top prize.

We won’t likely match Churchill’s (or Warren Buffett’s) achievements, but by aiming high we’ll always achieve something worthwhile.

http://www.investmentu.com/2011/Septemb ... sting.html

[winston]

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Lesson #2 – No Substitute for Hard Work

Churchill’s kingly lifestyle was bankrolled by churning out a stream of books and articles with steely discipline. He read widely and thought through his strategies much more than his critics give him credit for. His maxim was to always put “a premium on effort” and a “penalty on inertia.”

Churchill also benefited greatly from a team that provided time-consuming research, so that he could hit the ground running as he wrote wee into the morning after his champagne-soaked dinners.

You won’t get far in building your portfolio without doing some independent research of your own. It’s also a smart move to capture a stream of independent ideas and strategies.

[winston]

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Lesson #3 – Don’t Let Mistakes Get You Down

If success is going from one defeat to another without losing your enthusiasm, Churchill is its patron saint.

On one year, 1931, he lost his seat on the Conservative front bench over his stand on India, had his entire portfolio wiped out by the crash and was nearly killed when he looked the wrong way and was hit by a car in New York.

Churchill then had the courage to regain his footing and begin his comeback.

The market has a way of delivering punishing blows to our confidence and portfolios.

We’ll all make mistakes. Don’t throw in the towel, but come back all the wiser with a renewed sense of opportunity.

[winston]

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Lesson #4 – Don’t Play the Blame Game

How many of us always find someone to blame when an investment doesn’t pan out as expected. It’s that idiot newsletter editor, stupid financial advisor, or an incompetent executive who’s to blame for our unfortunate investments.

Churchill never wasted his time with the blame game, but merely moved on to the next speech or fight. Take ownership for your mistakes and move on.

[winston]

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Lesson #5 – Find Joy in Learning and Investing

Investing shouldn’t be a task to be endured but rather, like life, a journey to be enjoyed.

Churchill lived a large life with many interests and hobbies. He became a pretty good bricklayer and an accomplished artist.

Writing on a wide range of topics broadened both his perspective and built his impressive intellectual capital.

He was also a global traveler with a penchant for adventure and action. You should follow his example by reading about and, if possible, visiting interesting high-growth countries such as Malaysia, Chile and Poland.

[winston]

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Lesson #6 – Have a Global Perspective and Seek Adventure

Churchill’s grasp of world geography and history was simply astounding. His big advantage was being at the center of the British Empire that at its height covered 40 percent of the globe.

As a young man, he threw himself into five wars: in Cuba, Sudan, Egypt, India and South Africa.

No doubt that today he would be very interested in frontier markets that offer high opportunities as they play catch-up.

You also need to think globally in managing your portfolio and search worldwide for growth and value.

[winston]

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Lesson #7 – Be Aggressive and Conservative

One of Churchill’s unusual traits was his ability to be conservative and aggressive at the same time.

As head of the Royal Navy while the storm clouds of World War I gathered, Churchill was quite careful to position and protect its 1,100 warships.

But trying to end the carnage of trench warfare, Churchill attempted to knock Turkey out of the war and open a lifeline to Russia by seizing the Dardanelles, the gateway to Istanbul.

This brings me to my best advice for these times of high uncertainty and volatility.

Divide your investments into two portfolios. Put the bulk of your money into a well-diversified rock-solid “core portfolio” with the goal of preserving capital.

The rest goes into an aggressive high risk/high reward “explore portfolio.”